But ACLA’s Alan Mertz says clinical pathology test volume may increase because of other elements of this comprehensive makeover of the nation’s health system
Two provisions in the new healthcare legislation signed into law on March 23 by President Obama will have a direct effect on clinical laboratories, said Alan Mertz, President of the American Clinical Laboratory Association (ACLA). One provision is an across-the-board 1.75% cut to the clinical lab fee schedule in each of the next five years, effective in 2011.
The second provision directly impacting clinical laboratories is called the productivity adjustment and may also lead to a drop in the annual update for clinical laboratory testing. However, Mertz believes that other provisions in the act may prove positive for clinical labs in the coming years. Mertz made these remarks during a conference call late last month.
On the plus side of the ledger, as millions of uninsured gain coverage, the additional utilization of clinical laboratory tests could be favorable for the lab industry. “In general on healthcare reform, we support and applaud Congress on expansion of coverage for an estimated 31 million Americans,” Mertz explained. “We expect this will enable many more Americans to get access to valuable diagnostic laboratory services which we believe are the key part of a foundation for good healthcare and outcomes for people. So we support that. All of the sectors of healthcare and all the providers had to make contributions to this [act] because it’s not free to provide that coverage, and we were willing to do our proportional part of providing some savings for the government so that they could provide coverage.”
For the clinical laboratory industry, its concession of the 1.75% fee cut to the clinical laboratory fee schedule will begin next year and continue through 2015. Mertz said this reduction was a result of negotiations to prevent a deeper cut in reimbursement or new taxes. He noted that over the past summer, members of Congress considered adopting a co-payment for all lab services. This would have resulted in a 20% reduction in lab revenue, along with a considerable increases in the cost of collecting co-payments, Mertz said.
In addition, some members of Congress considered adding a new tax on the annual revenue of all clinical laboratories. This was designed to be similar to the 2.3% tax that was imposed on medical devices. The Dark Report has noted that, as customers of medical device companies, clinical laboratories will end up paying this new federal tax once it becomes effective on January 1, 2013 (See The Dark Report, March 29, 2010 “2.3% Medical Device Tax Hits Clinical Labs in 2013.”)
“All the lab industry groups made the decision in December that the 1.75% cut in the Medicare clinical lab fee schedule for five years would have been far preferable to a permanent 2% to 3% tax on the total annual revenue,” Mertz continued. “So, [the 1.75% cut] was purely in exchange for getting rid of the tax.”
The productivity adjustment on laboratory testing services was also a result of negotiations and will result in a percentage cut in reimbursement that will be determined as a result of productivity statistics reported annually by the U.S. Department of Labor (DOL). “Every year the DOL puts out the projected productivity growth of the economy,” he added. “The annual growth will range anywhere from 1.1% to 1.4% over the next 10 years. Then, there will be a reduction by that amount against the Consumer Price Index (CPI) updates to Medicare Part B reimbursement rates for lab services.”
One aspect of the new health law that may have a positive effect on clinical laboratories is the provision that calls for no co-payments or other cost sharing on preventive services. Mertz observes that this could encourage more Americans to get diagnostic tests. Another provision includes an extension of the technical component (TC) grandfather clause, which allows independent labs to receive direct payment of the TC of certain inpatient pathology interpretation services. This TC grandfather clause was extended through the end of this year.
Alan Mertz will speak in more detail about the new health law at the upcoming Executive War College on Laboratory and Pathology Management. It will be one of the first opportunities for laboratory executives and pathologists to hear a detailed perspective on the 2,700-page health law and the many ways it is likely to reshape health services and the laboratory testing industry. To see the agenda or to register for the Executive War College, visit www.executivewarcollege.com